Two ways of addressing the recession, neither of them good: panic and denial.
Panic and denial miss truth of recession
By Edward Cone
News & Record
People react to crises in predictable ways, and no responses are more predictable than denial and panic. Each of these polar opposites is on display amid the ongoing economic unpleasantness. These are boom times for "doomers," who see the recession triggering a breakdown in society as we know it, and for pollyannas, who want to pretend that we're just a few tax cuts away from prosperity.
This observation should be of more than anthropological interest to anyone occupying the fat part of the bell curve, between the two extremes. Understanding the nature and scale of the problems at hand is an important step toward dealing with those problems and to avoiding their future recurrence. If either pole exerts too much influence on public perception and policy, we're going to get things wrong.
Let's be clear: The recession we're in is very serious and in some ways historic. The situation is not yet under control, and a lot could still go wrong to deepen and prolong the downturn. Sorry, deniers, this stuff really is happening.
And yet most of us haven't emptied the last few dollars from our battered 401(k)s to buy canned goods and ammunition, either. We understand that even the Great Depression did not bring about the collapse of civilization. Sorry, doomers, but The End is Not Near.
The taxonomy of deniers includes the shills and the underinformed. There may be overlap between these groups. The underinformed do not appreciate the difference between a liquidity problem and the solvency issues at hand; the shills may just be feigning ignorance.
Great moments in denial include former Sen. Phil Gramm calling Americans "whiners" for noticing we were in a recession, and then-candidate John McCain proclaiming the fundamentals of the economy to be strong, and much of the rhetoric coming from congressional Republicans during the stimulus debate.
Last week, some CNBC shills interviewed Nouriel Roubini, the New York University economist who has called this recession correctly since before it started, and Nicholas Nassim Taleb, author of "The Black Swan," a book about the ways things go wrong and systems blow up. Roubini and Taleb wanted to discuss structural problems and long-term fixes for the economy. The happy-talkers wanted to give them nicknames and get investment tips. It was a tragicomic highlight of the denial mindset.
Pollyannas glide right past the huge destruction of wealth and the end of Wall Street as we knew it, the better to tell us that things are not so bad now as they were in previous downturns. The trick here is to compare the current level of, say, unemployment to the numbers from the nadir of a previous recession, as if we had reached whatever trough that awaits us and as if pain is only a relative thing.
When pressed, deniers play the Great Depression card, saying times aren't as bad now as they were then, which kind of makes the point they are trying to avoid.
At the opposite end of the spectrum are the extreme pessimists who look at the recession and see the end of prosperity and perhaps the collapse of the entire economic system and even civil society. This is a time-honored meme, and sooner or later it might come true, but the predictive powers of its practitioners are poor enough that an entire genre of New Yorker cartoons exists to mock them.
Nevertheless, the Internet is alive with predictions of doom. Check out the Club Orlov blog if you need something to bring you down this afternoon. The high priest of gloom is James Howard Kunstler, who long ago wrote an interesting book called "The Geography of Nowhere," all about the unsustainability of suburbia and car culture and has since been looking for the deus ex machina that could make his darkest dreams come true. For a while he said it would be the Y2K computer problem, and when that didn't pan out, peak oil. Now (without giving up on the end of the oil economy) he's grooving on financial Armageddon.
"What we really face is a comprehensive contraction in our activities, especially the scale of our activities, and the pressing need to readjust the systems of everyday life to a level of decreased complexity," Kunstler wrote recently at his blog, which has a non-newspaper-safe name that means "messed-up nation." He makes some good points about simplicity and sustainability, but they're wrapped up in so much negativity that a lot of people will ignore them.
Neither panic nor denial is a healthy response to a bad situation. In this case, denial is probably the more dangerous of the two, if only because it has more political currency and thus seems likely to do more harm. I try to temper my native optimism with a healthy diet of reality. My take is that we have some very tough times ahead and that with some thoughtful action we'll get through them.
© News & Record 2009